Sebi bars new NFOs till 1 July

4 Apr 2022 , 10:54 AM

The media reported that the Securities and Exchange Board of India (Sebi) has written to mutual fund industry body Association of Mutual Funds of India (Amfi), directing asset management companies (AMCs) to launch new fund offers (NFOs) only after the circulars on pool accounts are implemented. The revised deadline is now 1 July 2022.

In order to protect investors’ money, Sebi has asked all intermediaries to stop pooling of funds and directly transfer the money against every purchase and redemption via an exchange like BSE & NSE or directly transfer it to the AMC.

MFs transactions placed via stockbrokers and some other intermediaries are currently routed through brokers’ pool accounts. Investors pays for the MF unit and the money gets credited to the broker’s pool account. From there, it gets transferred to the NSE or the BSE’s clearing corporation, which then credits the money to the respective AMC’s bank account.

As per an earlier Sebi circular of October 2021, pooling of MF units and money was to be discontinued from 1 April 2022. The deadline, however, has been extended to 1 July 2022 to give more time to intermediaries to adjust to these new guidelines.

Under the new system, no stockbroker, clearing corporation or any other intermediary shall process MF transactions by way of pooling of accounts. Stockbrokers and clearing corporations should not handle both pay-in and pay-out of funds. MF purchases and sales must be directly credited and debited from the respective investor’s demat/folio accounts without routing it through pool accounts.

However, for MF units held in demat account, the practice of issuing physical or online Delivery Instruction Slip (DIS) to the depository participant (DP) may continue.

Sebi has also asked Amfi to implement the circular on two-factor authentication for the redemption of mutual funds across the industry.

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